Ms Bhutto said her opposition Pakistan People's Party (PPP) would take part in the 8 January general elections to try to keep them free and fair.

"The dice is stacked against the opposition, but we feel that if we boycott, then the regime won't need to rig, and the world will turn around and say the election was fair," she told the BBC shortly after the presidential address.

"So it's important for us to mobilise the support we have, and fight in the field, and... if we do that, they will be forced to rig to stop the PPP, or they will be forced to take the measures necessary to make the elections more credible," Ms Bhutto said.

But Mr Sharif said he and his allies would take no part in the polls unless judges sacked under emergency rule were reinstated, which correspondents say is unlikely to happen.

"We will try to convince other political parties so that this boycott is effective," he told reporters in Lahore.

Mr Sharif and Ms Bhutto are now expected to hold talks to decide what to do next.

The two former prime ministers have already filed papers to contest the elections. They can formally withdraw their nominations by 15 December at the latest.

'Conspiracy'

For Thursday's ceremony and TV address, Pervez Musharraf wore a black traditional suit (sherwani) instead of a military uniform.

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Musharraf has served Pakistan well and seen us through some tough times

Afterwards, he welcomed the return of Ms Bhutto and Mr Sharif to Pakistan, saying it would be "good for the political reconciliation".

Mr Musharraf also insisted that the general elections would be held on schedule "come hell or high water".

He promised the polls would be free and fair and open for monitoring by international observers.

As he was being sworn in, about 200 lawyers opposed to his rule clashed violently with police in Lahore.

A day earlier, Mr Musharraf had quit as army chief, handing the title over to Gen Ashfaq Pervez Kayani.

Ms Bhutto welcomed that move but said her party was "not in a hurry" to accept Mr Musharraf as a civilian president.

US President George W Bush called the Pakistani leader "an absolute reliable partner" but repeated US demands that the emergency end before elections.

The BBC's Barbara Plett in Islamabad says the civilian investiture does not mean an end to Mr Musharraf's difficulties.

The state of emergency has alienated much of the secular middle class, while an Islamist insurgency has also gained strength under his rule, she says.

If his opponents join forces against him, he could be in real trouble, our correspondent says. If not, he might be able to play them off against each other. Either way, the president will continue to struggle with the political crisis.